I Want to Buy a Home. Where Do I Go From Here? - Part 5

From the Desk of Don Draughn, Mortgage Professional

Website: http://ahfmortgage.elliemae.net/ddraughn

In Part One of this series, we looked at how important it is to Find Out What is on Your Credit Report. Once you know what is there, you can either move to the next step - obtaining mortgage pre-approval or working on any credit issues that may keep you from obtaining pre-approval. This is very important to your success in purchasing your new home in today's "credit crunch" climate.

In Part Two, we discussed the importance of Obtaining Mortgage Pre-Approval before you start looking at homes you might want to purchase. Without a Pre-Approval, you don't know how much home you can afford so you might wind up falling in love with a home that is out of your price range and wasting your time in your search not to mention sellers and real estate agents may not take you seriously.

Part Three covered how important it is to Select a Buyer's Agent. A Buyer's Agent gives you the benefit of having a Professional Real Estate Agent working on your behalf and representing your best interests throughout the entire transaction. Having this representation assures you that you get the absolute best deal you can with your new home purchase.

For Part Four, we looked at the topic of Viewing Homes the Fit Your Pre-Approval. It is very important to do this because you will either waste time looking at homes that you cannot purchase or you will fall in love with a home and then be dissappointed when you cannot buy it. Stay within your pre-approval and you cannot go wrong.

Part Five is going to deal with how to:

Make an Offer on Your New Home

There are many things that go into writing and making an offer to purchase your new home. You have to consider the condition of the home, the location of the home, the selling price of other homes in the general area that are listed for sale as well as homes in the area that have already sold. You don't want to over-pay for your home but at the same time you don't want to make an offer that might be looked at as not being a serious offer or may even be considered insulting by the sellers. Michael & Valerie Duggan of Blowing Rock, NC, wrote an article that discusses some of these things that I would highly recommend you read. It is entitled "Strategies for Making an Offer". Be sure to check it out by clicking on the title.

If you have been following this series and taking the steps as outlined, you will have a Professional Real Estate Agent working for you as your Buyer's Agent and this person can and will give you good advice on how to structure your offer. You should take their advice to heart because he/she is the expert and should know the market well enough to help you be successful in your purchase.

I would like to discuss the offer to purchase from a Mortgage Lending Perspective. There are several things that can go into the offer that will make your experience smoother and more successful.

The first thing I would like to discuss is Seller's Concessions. Simply put, a seller concession is an agreement by the seller to pay either a percentage of the purchase price or a flat amount of money toward closing costs that you the buyer will incur. The mortgage loan programs that are available in today's market will allow for anywhere form 3% to 6% of the purchase price. This can be a big help in getting you into your new home, particularly if you don't have a great deal of money to put into the transaction. At first glance, one might think "Why would the seller give me their money to pay my closing costs?" Well, in today's market, where the buyer is the one in charge in most cases, making a monetary concession to help you with your closing costs may make the difference in the seller getting the home sold and not. However, one thing you should be aware of is that the seller may counter your offer with a higher purchase price to offset the concessions. This is a good thing. It means the seller is willing to negotiate to get the home sold. Sometimes, you may even have to pay more than the MLS list price in order to get the concessions. That is a choice you will have to make based on how much you want to purchase that particular home.

The second thing I would like to discuss is Down Payment Assistance Programs or DPA's. A DPA, put very simply, is another way for the seller to help you purchase their home. A DPA is a grant that you receive from a non-profit organization like the Home Down Payment Gift Foundation, AmeriDream or Nehemiah. Your purchase offer will have a contingency that reads something like this, "Seller agrees to make a charitable contribution to the Home Down Payment Gift Foundation in the amount of $(the amount of your grant) at closing." The process of obtaining a DPA Grant is as follows:

1. Your Buyer's Agent presents your offer with the DPA Grant contingency.
2. The Seller accepts your offer with the DPA Grant contingency.
3. Your lender structures your loan application using the grant. (Currently, these grants are acceptable on FHA and VA mortgages)
4. Your lender applies for the grant on your behalf and has all pertinent documents and applications signed by the parties involved and attaches them to your purchase offer submitted to the bank.
5. Your loan application proceeds as normal.

The last thing I would like to address is Gift Money. Just about any mortgage program available in today's market will allow for gift money to be used to cover your down payment and closing cost requirements. The most important thing to remember about Gift Money is that all of the loan programs require that the gift to come from a relative. To use a gift the relative will have to write a gift letter stating that the money is a gift and that you are not require to pay the money back to them. In addition to the letter, your lender will also require a paper trail for the funds being given to you. This paper trail will consist of documentation of the funds coming out of the giver's account, a copy of the check made out to you, and a bank statement showing the money in your account. If the giver writes you a personal check, many times this will satisfy showing the money coming out of their account. This is a great way to be able to purchase your new home if you have a relative who is willing and able to make the gift to you.

Many people think that in order to purchase a home, you have to have a great deal of money saved up. The things I have covered in this segment show that the opposite is in many cases true.

If you need help finding money to help you purchase a home, I encourage you to call me to discuss your options and to obtain your pre-approval so you can move forward in achieving your American Dream of home ownership.

Next time, I will cover what is involved when you are ready to "Submit your mortgage application." Be sure to look for that post in the coming days.

Don Draughn is a Professional Mortgage Consultant and a Sale Manager at Affordable Home Funding, Inc. located at 900 Perinton Hills Office Park, Suite 970, Fairport, NY, 14450. His phone number is (585) 425-5811 or Toll Free (877) 223-0480 ext. 111.

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